Friday, May 11, 2007

The OxyContin Plea Deal and Mass Tort Strategy

As we mentioned yesterday, Purdue Pharma's parent company and three top executives pleaded guilty to deceptive marketing practices in connection with downplaying the addictive properties of the narcotic pain medication OxyContin.  Here's today's updated New York Times article, with further information and links to the plea agreements.  The new article adds information about the relationship between the plea deal and the civil litigation:

Of the $600 million in payments, Purdue Frederick will pay $470 million in fines and payments to a variety of federal and state agencies.

It also agreed to pay at least $130 million to resolve civil lawsuits brought by pain patients who claimed they became addicted as a result of having OxyContin prescribed to them. A lawyer for one company executive said that much, if not all, those funds have been paid out in the process of settling lawsuits. There are still claims against the company by private plaintiffs.

This week, Purdue agreed to pay $19.5 million to 26 states and the District of Columbia to settle complaints that it encouraged physicians to overprescribe OxyContin.

Pleading guilty to federal criminal charges and paying $600 million can't be fun, although according to the Times article, some think that the fines should have been higher.  But as a matter of mass tort litigation strategy, it seems to me that the company made out pretty well.  Timing is everything.

Ordinarily, a criminal plea like this one would trigger massive litigation and vastly improve plaintiffs' leverage.  The guilty plea could bring new plaintiffs out of the woodwork, could attract more plaintiffs' counsel to the litigation, could encourage those already in it to invest more heavily, could alter the momentum of the litigation, could affect jurors' attitudes, and in some jurisdictions, could bind the company as a matter of offensive nonmutual issue preclusion.  I've written in the past about "coattail class actions" -- private mass litigation that follows government actions.

But in the OxyContin litigation, the defendant previously defeated many individual plaintiffs, and then reportedly settled 90% of the remaining cases on the cheap about four months ago.  Add the passage of time and the benefit of the statute of limitations, and it appears likely that this criminal plea won't do the kind of damage one ordinarily would expect in the mass tort context.


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What's intriguing to me is the set aside of $130 million to settle civil claims, which plaintiffs had previously had great difficulty winning. The reporting suggests that prosecutors required the civil-suit settlement as part of the package deal of fines and pleas. If that's true, that's noteworthy -- will prosecutors in the future see compensation of civil tort plaintiffs (particularly those who have difficulty winning their civil cases) as part of their task? And is that a good thing? It may be a compensation shortcut, but it has the feel of a legislative compensation fund, which has of course been seen as more appropriate for legislative creation.

Posted by: Byron Stier | May 11, 2007 10:15:01 AM

... and what happens for, what happened to, the masses of victims, of this massive, deceptive, marketing tactic, that brought billions to, and made millionaires of, the criminals that perpetrated this fraud on the people of these united states? oh well? ...

Posted by: anonymous victim | May 20, 2007 12:58:18 PM

AmI reading this right? Becouse Purdue paid a fine that is a small fraction of just one years profits from the sale of Oxy Contin,I can'nt sue for damages? After the HELL i suffured from being addicted to that poison. Someone is on the take!

Posted by: steve | Sep 11, 2007 2:13:57 AM

I,am a victim of Oxycontin. I got my first script back in 1996. I have been on it this long and I had a hard time getting off. I nearly went broke buying it, lost valuable time with my grand children that I will never get back and they don't have enough money to replace this. This is so easy to get and it is so addictive that if you use it for a couple of days you are hooked. Now I wonder what kind of damage it has done to me inside. I have all my records from when I first started and some from where I bought it in Mexico. Where is our goverment that is going to protect us from companies like this. Our goverment is getting to soft and something needs to be done. I know people that get this pill from doctors that medicare or medicade pays for it then they sell it on the street for big bucks. I have had 34 major operations and cancer. I have been shot,stabbed,struck by lightning and a rattlesnake bite. I don't think any of these hurt me as bad as this pill. It will take over your life and all you do is try to get it. I used suboxone to get off and have been off for about six months. I don't have the pain I did have and I think it was from my body telling me to get more pills or I will hurt you. I would really like to know how to get to the victims fund. I would really like to get paid for doing research for them and for all the pain it caused me.

Posted by: phil bone | Dec 3, 2007 10:24:37 AM

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